Proper Pricing

There are only four things that will determine your homes value, Price, Condition, Type of Sale and Location.  Nothing is more important or difficult to do than determine what to sell your home for.  As an owner the only way you can get a solid estimate of your homes market value is to bring in a professional to help you interpret all the market data that is available.

Automated Value Systems vs. a Broker Price Opinion
One of the most common conversations we have with a seller is a conversation about our professional opinion of value versus the automated value some website can provide.  Automated Value Systems have come a long way in the past few years and sometimes can be shockingly accurate.  The problem with Automated Systems is they have no real life experience or understanding of the data they use.  All it takes to grossly miscalculate your home's value is to use a comparable sale that was in absolute need of remodel or has a unique feature such as a waterfront lot, or a massive amount of upgrades.  In the end the human brain (when applied and properly trained) still wins in valuing properties. 

For Sale vs. Sold
When we place a home on the market it is important to know what other sellers are asking for their property.  The current available inventory gives us the best idea of what our competition will be.  Price higher, and likely we will not sell.  Price lower and we stand a good chance of being the next sale.  Years ago, before I was a Real Estate Agent, I used to pay attention to the asking price of similar models to the home I owned.  I naively believed when the sign was taken down that the owner had been successful.  Years of experience as a Realtor have taught me that there are price drops, seller to buyer contributions, failed listings, canceled listings, less than asking price sales and many other problems with using the asking price as a bench mark for our asking price.  We have to rely on closed sales data from the MLS and Tax Records as the basis for our asking price.

Hiring the Agent with the Highest Opinion of Value
One of the first things I was taught as an agent by a large national chain brokerage was to get the listing at any price and start working the seller for a price drop.  At the time it made sense at the time and was a Listing Capture technique I was taught when I joined up with another national chain real estate company.  My point is this, the largest real estate companies know that sellers have a tendency to hire the agent that tells them what the want to hear instead of the agent who is professional and honest up front.  Study after study have proven that the seller who hires the agent promising the highest price will eventually sell their property for up to 15% below true market value. 

Testing the Market High and Then Dropping the Price
This is the most common mistake a seller, or inexperienced Realtor, makes when placing a home on the market.  The reason for doing this is simple and easy to understand.  "Lets see how much we can get, I don't want to leave any money on the table." I have fallen into this trap before as well.  It is sometimes hard to see the disappointment on a seller's face when they realize their home will not sell at the price they hoped.  Years and failed attempts have taught me that proper pricing is the best way to maximize the net proceeds on a sale.  Years of working with buyers has taught me more about selling a house than listing homes ever did.  Almost every buyer I have ever worked with will go out and see all the homes on the market when they first get started.  During that period of time they are still unsure what they are going to buy and trying to figure out what is available.  As they start to hone in on the house they will buy they start to get picky about what they will go see.  Often we only go out to see new listings and homes that have come into their price range.  If they have seen your home before the price reduction they are quick to overlook it when it comes into a reasonable price because in their mind they have already written your home off.  If you price right at the beginning you entice the largest and best pool of buyers in the market, the pool of buyers waiting for a new listing that are ready to buy.  You have about 7 days to capture this pool of buyers.  After that you risk having to under-price your home to capture their interest. 

I Want to Price High Because I know the Buyer Will Want to Negotiate
This used to be so true.  There is no doubt that there was a time and a place where every properly priced property on the market was priced higher than the price the seller would eventually get.  When I first started selling homes this price was as much as 10% in some markets.  I know this has worked for sellers in the past and may have worked for you as well.  We have a few problems with this technique in today's market however.  First you need to be conscious of the fact that all buyers are concerned they are not buying at the bottom or in a stable market.  They are looking for a deal in part to protect against the risk of further price reductions.  Second there is a glutton of overpriced homes on the market right now and you will get lost in the mix rather than getting showings.  Third we are faced with the internet and a change in agent/buyer behavior.  Not too many years ago it was the Realtor, who often worked a small area, would choose the homes to show a buyer.  Today it is most often the buyer who selects the homes they want to see and when you combine how they look for homes on the internet with their desire to get a deal they are likely to get showings to the best buyer pool out there, the buyers looking for a new listing.  Keep in mind the buyers most anxious to buy have often been looking for a while and probably know the value of homes in the area better than you, their agent, or myself.  They are intimately focused on price and the market they are going to buy in.  Fourth you are faced with buyers who are also looking at Foreclosure and Short Sale listings where through the years their agents have been taught to not try and negotiate much on price. In today's market buyers are accustomed to offering very near asking price or their offer will go nowhere.